Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). The understated tax allocated to you is generally the amount you are responsible for.

This type of relief is available only for unpaid liabilities resulting from the understated tax. Refunds are not
allowed.

To request separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857.

You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. (Under this rule, you are no longer married if you are
widowed.)

You were not a member of the same household (explained below) as the spouse with whom you filed the joint return at any time during the 12-month per- iod ending on the date you file Form
8857.

You and your spouse are not members of the same household if you are living apart and are estranged. However, you and your spouse are considered members of the same household if any of the following conditions are met.

You and your spouse reside in the same dwelling.

You and your spouse reside in separate dwellings but are not estranged, and one of you is temporarily absent from the other's household as explained in (3)
below.

Either spouse is temporarily absent from the household and it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Examples of temporary absences include absence due to imprisonment, illness, business, vacation, military service, or
education.

You must be able to prove that you meet all of the requirements for separation of liability relief (except actual knowledge) and that you did not transfer property to avoid tax (discussed later). You must also establish the basis for allocating the erroneous
items.

Even if you meet the requirements discussed previously, separation of liability relief will not be granted in the following situations.

The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business
partner.

The IRS proves that at the time you signed your joint return, you had actual knowledge (explained below) of any erroneous items giving rise to the deficiency that were allocable to your spouse (or former spouse). For the definition of erroneous items, see
Erroneous Items earlier under
Innocent Spouse Relief.

The relief discussed here does not apply to any part of the understated tax due to your spouse's (or former spouse's) erroneous items of which you had actual knowledge. You and your spouse (or former spouse) remain jointly and severally liable for this part of the understated
tax.

If you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion of the
item.

You had actual knowledge of an erroneous item if:

You knew that an item of unreported income was received. (This rule applies whether or not there was a receipt of
cash.)

You knew of the facts that made an incorrect deduction or credit
unallowable.

For a false or inflated deduction, you knew that the expense was not incurred, or not incurred to the extent shown on the tax
return.

Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. Also, your actual knowledge may not be inferred when you merely had a reason to know of the erroneous item. Similarly, the IRS does not have to establish that you knew of the source of an erroneous item in order to establish that you had actual knowledge of the item
itself.

Your actual knowledge of the proper tax treatment of an erroneous item is not relevant for purposes of demonstrating that you had actual knowledge of that item. Neither is your actual knowledge of how the erroneous item was treated on the tax return. For example, if you knew that your spouse received dividend income, relief is not available for that income even if you did not know it was taxable.

Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. The IRS audited their return and found that Bill did not report $20,000 of self-employment income. The additional income resulted in a $6,000 understated tax, plus interest and penalties. After obtaining a legal separation from Bill, Karen filed Form 8857 to request separation of liability relief. The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. Karen is also liable for the understated tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for
it.

Even if you had actual knowledge, you may still qualify for relief if you establish that:

You were the victim of spousal abuse or domestic violence before signing the return,
and

Because of that abuse, you did not challenge the treatment of any items on the return because you were afraid your spouse (or former spouse) would retaliate against
you.

If you establish that you signed your joint return under duress (threat of harm or other form of coercion), then it is not a joint return, and you are not liable for any tax shown on that return or any tax deficiency for that return. However, you may be required to file a separate return for that tax year. For more information about duress, see the instructions for Form
8857.

If your spouse (or former spouse) transfers property (or the right to property) to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the fair market value of the property on the date of the transfer. The increase may not be more than the entire amount of the liability. A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency. This presumption will not apply if:

The transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement,
or

You establish that the transfer did not have as its main purpose the avoidance of tax or payment of
tax.

If the presumption does not apply, but the IRS can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the tax liability allocated to you will be increased as explained
above.